Abe’s economic policies force more SMEs to close down

August 13, 2016

The number of small- and medium-sized enterprises in Japan has been declining. The number decreased by 28.5% from 5.33 million in 1986 to 3.81 million in 2014. Of them, the number of smaller enterprises dropped by 31.9% from 4.77 million to 3.25 million.

This is caused not only by the long-term slump in domestic demand but also by the national government’s economic and industrial policies which put priority on boosting large corporations’ international competitiveness and helping them to increase profits while regarding SMEs as “complements” to large companies. SMEs have also been largely neglected in economic stimulus measures implemented by the central and local governments.

Large businesses have promoted overseas expansion since the late 1980s which has brought about a decline and hollowing out of Japan’s local economies based on small local businesses. Since 2000, under the slogan of “structural reform”, the trend of fostering highly competitive companies has become even stronger.

A survey by Tokyo Shoko Research shows that the number of enterprises which were dissolved or closed down exceeded 25,000 in 2009, following the worldwide recession triggered by the bankruptcy of Lehman Brothers. In 2013, the year after Prime Minister Abe Shinzo returned to power, the number went up to 29,351. It has been hovering over 25,000 between 2014 and 2015.

SMEs account for 99.7% of all businesses in the country. About two-thirds of workers in the nation are working at SMEs. As the Small and Medium Enterprise Charter states, SMEs are the “driving force of the Japanese economy” and “make contributions to their communities and the life of their inhabitants”.

Nevertheless, the Abe administration intends to gradually lower the government-guaranteed rate in the current credit guarantee program for small businesses. PM Abe is also saying that he will further his economic policy (Abenomics) which aims to “rejuvenate” Japan’s economy by driving “underproductive” SMEs into bankruptcy.

It is obvious that the promotion of Abenomics will force more SMEs to go bankrupt.